The entire North Island of New Zealand has been declared in drought and Wellington, the nation's capital, has an estimated 17 days of water left. The New Zealand government estimates the dry spell could cost the nation up to $3-billion and desperate farmers say they need drenching rain within the next month to avoid an even bigger crisis, as Cathy Van Extel reports.

2013 has been one of the driest, sunniest, and hottest on record in New Zealand. The national president of Federated Farmers, Bruce Wills, runs sheep and cattle in the Hawke's Bay region on the east coast, where there’s been little rain in seven months.

Mr Wills expects his income to be down well over a third this season. On top of that, his costs are up.

‘This is severe,’ he says. ‘We have to go back 70 years to find anything as severe as this on such a wide scale. So this is historic. It’s hurting.’

Worst affected are intensively farmed dairy regions like Waikato, Northland, and Bay of Plenty, Mr Wills says. Production in Northland is down 20 per cent, while Waikato has dropped 15 per cent, he says.

The dairy industry is New Zealand’s biggest export earner, worth more than $12-billion, accounting for over a third of the world’s dairy trade.Craig McBeth from Dairy NZ says that with the historic drought conditions it’s becoming difficult to source feed for cows.

‘Farmers are increasingly drying their cows off about two months earlier than they would normally be doing so,’ he says. ‘Farmers are looking at their options to get through the winter.’

Mr McBeth says in many regions there might not be enough pasture cover or feed supplement to get the cattle through to calving in the spring.

‘We’re really looking at what options are available for farmers to balance out the supply and demand equation for feed,’ he says. ‘And we’ve had a little bit of rain, and not enough to fix the problem—so we’re hoping that more rain is going to be following through shortly and that grass will be able to grow significantly while it’s still warm enough to do so.’

‘Otherwise we’re going to be looking at alternative feed sources such as palm kernel imports or having to carry less stock through the winter to ensure the ones that remain are fed.’

The milk shortage created by the drought has started to push up the global price of milk. The most recent online global trade auction saw milk prices increase 10 per cent, while whole milk powder rose 18 per cent. That’s good news for Australian diary producers in the export market.

‘A lot of those contracts will be negotiated in the next couple of months and at a higher level than we saw in this current season,’ she says. ‘There will be possibly some flow-on effects, but it will be more muted for those more domestically focused regions.’

The lack of pasture and supplementary feed means dairy as well as sheep and cattle producers are offloading high numbers of stock. Mr Wills says there’s currently a two to three week backlog at processing plants.

‘Our processing companies, our freezing works, they’ve been flat tack 24/7 now for a long, long time,’ he says. ‘We’ve still got waiting times. I’m told some farmers are still having to wait two, three weeks to get stock processed.’

The losses in agriculture are expected to shave about 1 per cent off New Zealand’s economic growth. Prime Minister John Key says the drought could cost between $2–$3 billion. Mr Wills says the full impact is still playing out.

‘We don’t know when this is going to end,’ he says. ‘We’re still very much in the grips of a serious drought and because we are the significant income earner for this economy of ours, it’s going to impact right across the board.’

It’s not only farmers who are looking skywards. The capital, Wellington, has only 17 days of water left, based on normal consumption levels. Residents are on water restrictions, including a full ban on outdoor water use.

Nigel Wilson, chair of the Greater Wellington Regional Council water supply committee, says that even if the public can reduce consumption by 10 per cent, it will only give the city another 10 days of water. He says if there’s no rain soon they may begin drawing from nearby rivers. However, rain over parts of New Zealand, including Wellington, in the past few days has brought some optimism.

‘You really, really want it to rain, just arrange a cricket test in Wellington,’ Mr Wilson says. ‘That’s what happened on the weekend.’

But the rain was the first the city has had since 4 February, and much more is needed, Mr Wilson says.

There is a silver lining to the drought for some. Mr Wills says the Hawke’s Bay wine region is expecting its best vintage this year.

‘It’s great for our grape growers—and we’ve got quite a group of them here, great for our summer fruit growers,’ Mr Wills says. ‘And of course it’s a never-ending summer for the holiday makers and those people that don’t rely on rain to help their businesses go.’